<PAGE>
<PAGE>

            SECURITIES AND EXCHANGE COMMISSION

                Washington, D. C.  20549
________________________________________________________________

                         Form 10-QSB


[x] QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE
      SECURITIES AND EXCHANGE ACT OF 1934

      For the quarterly period ended March 31, 1999

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
       THE EXCHANGE ACT

For the transition period from ________ to ______.


Commission File Number: 0-24625


                                                                 
                        CFS Bancshares, Inc.
       --------------------------------------------------
       (Exact name of registrant as specified in charter)

Delaware                                      63-1207881
--------------------------------          --------------------
(State or other jurisdiction of            (IRS Employer 
incorporation or organization)          Identification Number)
          


1700 3rd Avenue North
Birmingham, Alabama                             35203
-------------------------                      -------        
(Address of principal                          Zip Code
 executive office)


Registrant's telephone number, including area code:(205)328-2041

Indicate by check mark whether the registrant (1) has filed all
the reports required to be filed by section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. 

Yes x    No    
   ---     ---

       Number of shares outstanding of common stock 
                     as of March 31, 1999

$0.01 par value common stock               130,000 shares    
----------------------------               -----------------
          Class                              Outstanding

<PAGE>
<PAGE>
             CFS BANCSHARES, INC. AND SUBSIDIARY



                    TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION:                        PAGE No.
     

Consolidated Balance Sheets at March 31, 1999
and September 30, 1998 (unaudited)                       -3-     
  
Consolidated Statements of Operations for the 
Three and Six Months Ended March 31, 1999
1998 (Unaudited)                                         -4-

Consolidated Statements of Cash Flows for the 
Six Months Ended March 31, 1999 and 1998 
(unaudited)                                              -6-

Consolidated Statements of Comprehensive Income
for the Six Months ended March 31, 1999
and 1998 (unaudited)                                     -8-

Notes to Consolidated Financial Statements               -9-

Management's Discussion and Analysis of Financial 
Condition and Results of Operations                     -11-

PART II - OTHER INFORMATION                             -16-

SIGNATURES                                              -17-  
<PAGE>
<PAGE>
                   CFS BANCSHARES, INC. AND SUBSIDIARY
                      CONSOLIDATED BALANCE SHEETS
                             (Unaudited)
<TABLE>
<CAPTION>
                                                  March 31,     September 30,
                                                     1999           1998
                                                 ------------   ------------
<S>                                               <C>            <C>
   ASSETS
   ------
Cash and amounts due from depository
  institutions                                   $ 2,892,934      $ 3,392,435
Federal funds sold and overnight deposits          3,205,572        1,924,850
                                                 -----------      -----------
    Total cash and cash equivalents                6,098,506        5,317,285

Interest bearing deposits                            160,654          159,515
Investment securities held to maturity
  (fair value of $5,675,539 and $6,406,439,
  respectively)                                    5,647,783        6,338,130
Investment securities available for sale,
  at fair value (cost of $29,599,060 and
  $29,110,589, respectively)                      29,374,587       29,122,737
Federal Home Loan Bank stock                         670,000          670,000
Loans receivable, net of allowances               43,477,248       45,413,484
Premises and equipment, net                        3,941,081        4,030,996
Real estate acquired by foreclosure                  157,497           59,634
Accrued interest receivable on investment
  securities                                          40,835           71,252
Accrued interest receivable on mortgage-
  backed securities                                  174,570          217,817
Accrued interest receivable on loans                 325,718          352,244
Other assets                                         423,397          412,948 
                                                 -----------      -----------
    Total assets                                 $90,491,876       92,166,042
                                                 ===========      ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Interest-bearing deposits                        $72,690,115       73,892,189 
Advance payments by borrowers for taxes
  and insurance                                      144,459          300,648
Other liabilities                                    499,587          719,682 
Employee Stock Ownership Plan debt                   113,275          145,471
FHLB advances                                      9,200,000        9,200,000
                                                 -----------      -----------
    Total Liabilities                             82,647,436       84,257,990

Stockholders' Equity:
Common Stock                                         130,000          130,000
Additional paid-in capital                         1,174,930        1,167,160
Retained earnings                                  6,793,534        6,732,461
Accumulated other comprehensive income (loss)       (143,663)           7,602
Unearned common stock held by ESOP                  (110,361)        (129,171)
                                                 -----------      -----------
    Total Stockholders' Equity                     7,844,440        7,908,052
                                                 -----------      -----------
      Total liabilities and stockholders'
        equity                                   $90,491,876       92,166,042
                                                 ===========      ===========
</TABLE>
See accompanying notes to consolidated financial statements.
                                 3<PAGE>
<PAGE>

                   CFS BANCSHARES, INC. AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Unaudited)

<TABLE>
<CAPTION>
                                                         Three Months                 Six Months
                                                        Ended March 31,             Ended March 31,
                                                 ----------------------------   -----------------------
                                                     1999            1998          1999         1998
                                                 ------------    ------------   ---------    ----------
<S>                                               <C>            <C>            <C>          <C>
INTEREST INCOME:
Interest and fees on loans                       $1,012,729      $  995,060     $2,049,139   $1,950,593
Interest and dividend income on
  investment securities                              63,769         141,668         98,481      303,540
Interest income on mortgage-backed
    securities                                      468,317         478,528        955,931      976,361
Other interest income                                14,630          33,211         47,980       65,002
                                                 ----------      ----------     ----------   ----------
Total interest income                             1,559,445       1,648,467      3,151,531    3,295,496

Interest on deposits                                657,469         741,757      1,361,326    1,497,205
Interest on FHLB advances                           132,530         133,540        265,155      275,550
                                                 ----------      ----------     ----------   ----------
Total interest expense                              789,999         875,297      1,626,481    1,772,755

    Net interest income                             769,446         773,170      1,525,050    1,522,741
Provision for loan losses                                --              --             --           --
                                                 ----------      ----------     ----------   ----------
Net interest income after provision
  for loan losses                                   769,446         773,170      1,525,050    1,522,741

OTHER INCOME:
Service charges on deposits                          72,270          91,314       182,686       191,704
Gain (loss) on sale of assets                        (1,823)            576         4,524        10,861
Gain on sale of securities                           27,486          16,832        27,486        27,360
Other                                                11,177           6,556        17,758        13,657
                                                 ----------      ----------     ----------   ----------
    Total Other Income                              109,110         115,278       232,454       243,582

EXPENSES:
Salaries and employee benefits                      329,673         312,797       682,884       609,641
Net occupancy expense                                30,509          34,496        58,795        64,966
Federal insurance premium                            25,140          25,244        49,169        49,991
Data processing expenses                             66,327          67,254       131,368       107,637
Professional services                                51,495          48,731       118,606       126,809
Depreciation and amortization                        74,303          66,930       147,246       134,032
Advertizing expense                                  31,942          25,549        83,577        66,755
Office supplies                                      21,269          21,454        35,076        38,150
Insurance expense                                    14,859          15,269        29,717        30,793
Other                                                92,913         114,997       167,997       228,877
                                                 ----------      ----------     ----------   ----------
    Total other expense                             738,430         732,721      1,504,435    1,457,651
                                                 ----------      ----------     ----------   ----------
Income before income taxes                          140,126         155,727        253,069      308,672
Income tax expense                                   45,032          56,062         94,496      111,122
                                                 ----------      ----------     ----------   ----------
</TABLE>

See accompanying notes to consolidated financial statements.

                              4<PAGE>
<PAGE>

                   CFS BANCSHARES, INC. AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Unaudited)


<TABLE>
<CAPTION>
                                                         Three Months                 Six Months
                                                        Ended March 31,             Ended March 31,
                                                 ----------------------------   -----------------------
                                                     1999            1998          1999         1998
                                                 ------------    ------------   ---------    ----------
<S>                                               <C>            <C>            <C>          <C> 
Net Income                                          95,094          99,655       158,573       197,550
                                                  ========        ========       =======       =======
Basic earnings per common share                   $   0.79        $   0.77          1.32          1.52
                                                  ========        ========       =======       =======
Basic average shares outstanding                   119,695         130,000       119,695       130,000
                                                  ========        ========       =======       =======
Diluted earnings per common share                 $   0.72        $   0.72          1.20          1.42
                                                  ========        ========       =======       =======
Diluted average shares outstanding                $131,695        $142,000       131,695       142,000
                                                  ========        ========       =======       =======
Dividends declared and paid per 
   common share                                   $     --        $     --          0.75          0.75
                                                  ========        ========       =======       =======
</TABLE>

See accompanying notes to consolidated financial statements

                               5<PAGE>
<PAGE>

                   CFS BANCSHARES, INC. AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Unaudited)
<TABLE>
<CAPTION>
                                                      Six Months Ended
                                                          March 31,
                                                     1999           1998
                                                 ------------   ------------
<S>                                               <C>            <C>
Cash flows from operating activities:
Net income                                       $    158,573    $   197,550
Adjustments to reconcile net income to
 net cash provided by operating activities
  Depreciation and amortization                       147,246        134,032
  Compensation expense recognized on ESOP
     allocation                                        17,160             --
  Net amortization of premium on investment
    securities                                         70,907         25,823
  Gain on sale or call of investment securities
    available for sale                                (27,486)       (27,360)
  Gain on sale of real estate acquired by 
    foreclosure                                        (4,101)            --
  Charge off of investment securities held to 
    maturity                                               --         25,000
  Decrease in deferred gain on sale of REO             (1,228)            --
  Decrease in accrued interest receivable             100,190         48,977
  Increase in other assets                            (10,449)      (980,686)
  Decrease in accrued interest on deposits            (21,200)       (26,565)
  Decrease in other liabilities                      (256,558)      (330,481)
                                                  -----------    -----------
Net cash provided by (used in) operating 
  activities                                          173,054       (993,710)

Cash flows from investing activities:
Purchase of investment securities held to 
  maturity                                           (502,656)            -- 
Purchase of investment securities available
  for sale                                         (9,781,740)   (11,199,771)
Purchase of interest-bearing deposits                  (1,139)            --
Maturity or call of investment securities
  available for sale                                1,000,000      3,255,835
Proceeds from sale of investment securities
  available for sale                                1,550,760      4,878,741
Net change in loans                                 1,828,615     (1,768,683)
Proceeds from principal collected on 
  investment securities held to maturity            1,182,112      1,181,627
Proceeds from principal collected on investment
  securities available for sale                     6,710,248      2,452,935
Purchase of premises and equipment                    (57,331)       (16,293)
Purchase of real estate acquired by foreclosure            --         (5,361)
Proceeds from sale of real estate acquired
  by foreclosure                                       13,861             --
                                                  -----------    -----------
    Net cash provided by (used in) investing 
      activities                                    1,942,730     (1,220,970)

</TABLE>

See accompanying notes to consolidated financial statements

                              6<PAGE>
<PAGE>
                   CFS BANCSHARES, INC. AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Unaudited)
<TABLE>
<CAPTION>
                                                     Six Months Ended
                                                         March 31,
                                                 -------------------------
                                                     1999           1998
                                                 ------------   ----------
<S>                                               <C>            <C>
Cash flows from financing activities:

Net decrease in interest bearing deposits         (1,180,874)      (838,257)
Increase (decrease) in advance payments by
  borrowers for taxes and insurance                 (156,189)      (120,678)
Cash dividends                                       (97,500)       (97,500)
                                                 -----------     ---------- 
   Net cash used in financing activities          (1,434,563)    (1,056,435)

Net increase (decrease) in cash and cash 
  equivalents                                        681,221     (3,211,115)

Cash and cash equivalents at beginning of 
  period                                           5,317,285      6,485,115
                                                 -----------     ---------- 
Cash and cash equivalents at end of period       $ 5,998,506      3,274,000
                                                 ===========     ==========

Supplemental information on cash payments

   Interest paid on deposits                     $ 1,315,331      1,494,236

Supplemental information on noncash transactions:
  Loans transferred to real estate acquired
    by foreclosure                               $   107,621         88,779

</TABLE>

See accompanying notes to consolidated financial statements

                              7<PAGE>
<PAGE>

                   CFS BANCSHARES, INC. AND SUBSIDIARY
            CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                             (Unaudited)


<TABLE>
<CAPTION>
                                                         Three Months                 Six Months
                                                        Ended March 31,             Ended March 31,
                                                 ----------------------------   -----------------------
                                                     1999            1998          1999         1998
                                                 ------------    ------------   ---------    ----------
<S>                                               <C>            <C>            <C>          <C> 
Net income                                        $  95,094      $ 99,665       $ 158,573    $197,550

Other comprehensive income, before tax:
  Unrealized holding (losses) gains arising
     during the period                             (190,658)       22,659        (212,617)     38,600  
  Less reclassification adjustment for gains
     on securities available for sale                27,486        16,832          27,486      27,360
                                                  ---------      --------       ---------    --------
       Total other comprehensive income,
         before tax                                (218,144)        5,827        (240,103)     11,240

Income tax expense (benefit) related to 
 other comprehensive income:
  Unrealized holding gain (loss) on available
    for sale securities                             (70,543)        8,384         (78,668)     14,282
  Less reclassification adjustment for gains 
    on securities available for sale                 10,170         6,228          10,170      10,123
                                                  ---------      --------       ---------    --------
       Total income tax expense (benefit) 
         related to other comprehensive income      (80,713)        2,156         (88,838)      4,159
                                                  ---------      --------       ---------    --------
       Total other comprehensive income (loss), 
         net of tax                                (137,431)        3,671        (151,265)      7,081
                                                  ---------      --------       ---------    --------
       Total comprehensive income (loss)          $ (42,337)     $103,336       $   7,308    $204,631
                                                  =========      ========       =========    ========
</TABLE>

See accompanying notes to consolidated financial statements

                              8<PAGE>
<PAGE>
              CFS BANCSHARES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           (UNAUDITED)

1.  BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments (none
of which are other than normal recurring accruals) necessary for
a fair statement of financial position of the Company and the
results of operations for the three month and six month periods
ended March 31, 1998 and 1999.  The results contained in these
statements are not necessarily indicative of the results that
may be expected for the entire year.  For further information,
refer to the consolidated financial statements and notes
included in the Company's annual report on Form 10-KSB for the
year ended September 30, 1998.

2. RECLASSIFICATIONS

Certain items in the 1998 consolidated financial statements have
been reclassified to conform to current year classifications.

3.  NET INCOME PER SHARE 

Presented below is a summary of the components used to calculate
diluted earnings per share for the three month and six months
ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>


                                                   Three months ended       Six months ended
Diluted earnings per share:                             March 31,               March 31,
                                                     1999       1998         1999      1998
                                                     ----       ----         ----      ----
<S>                                                <C>          <C>         <C>        <C>
Weighted average common shares outstanding         120,407      120,407     120,407    120,407
Net effect of the assumed exercise of stock 
  options based on the treasury stock method 
  using average market price for the quarter        12,000       12,000      12,000     12,000
                                                   -------      -------     -------    -------
Total weighted average common shares and 
  potential common stock outstanding               132,407      132,407     132,407    132,407
                                                   =======      =======     =======    =======
 
</TABLE>
4.  RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued Financial Accounting Standard No.
130, Reporting Comprehensive Income, ("FAS130").  This standard
establishes standards for reporting and displaying comprehensive
income and its components in a full set of general purpose
financial statements.  FAS130 requires all items that are
required to be recognized under accounting standards as
components of comprehensive income be reported in a financial
statements that is displayed in equal prominence with the other
financial statements.  The term "comprehensive income" refers to
revenues, expenses, gains, and losses that are included in
comprehensive income but excluded from earnings under current
accounting standards.  Currently, "other comprehensive income"
for the Company consists of items recorded in equity under
Financial 

                              9<PAGE>
<PAGE>
Accounting Standard No. 115, Accounting for Certain Investments
in Debt and Equity Securities.  FAS130 is effective for
financial statements for years beginning after December 15,
1997.

In June 1997, the FASB issued Financial Accounting Standard No.
131, Disclosures about Segments of an Enterprise and Related
Information, ("FAS131").  FAS131 establishes new standards for
the disclosures made by public business enterprises to report
information about operating segments in annual financial
statements and requires those enterprises to report selected
information about operating segments in interim financial
reports to shareholders.  It also establishes standards for
related disclosures about products and services, geographic
areas, and major customers.  FAS131 is effective for financial
statements for years beginning after December 15, 1997.  The
Company does not have separate segments and thus has not
segmented reporting in the accompanying financial statements.

In June 1998, the FASB issued Financial Accounting Standard No.
133, Accounting for Derivative Instruments and Hedging
Activities, ("FAS133").  The standard establishes comprehensive
accounting and reporting standards for derivative instruments
and hedging activities.  FAS133 requires that all derivative
instruments be recorded in the statement of financial position
at fair value; the accounting for gains or losses due to changes
in fair value of the derivative instruments depends on whether
the derivative instruments qualify as hedging instruments.  If a
derivative instrument does not qualify as a hedge, the gain or
loss is reported in earnings when it occurs.  However, if the
derivative qualifies as a hedging instrument, the accounting
varies based on the type of risk being hedged, and includes
either recognizing earnings for changes in fair value each
reporting period, or accumulating changes in other comprehensive
income and recognizing earnings during the period that the
hedged forecasted item impacts earnings.  FAS133 becomes
effective for financial statements for the first quarter of
fiscal years beginning after June 15, 1999.  Management is
evaluating the impact of FAS 133 on the financial statements of
the corporation.

                              10<PAGE>
<PAGE>

MANAGEMENT DISCUSSION AND ANALYSIS

GENERAL
-------
CFS Bancshares, Inc. ("the Company") a Delaware corporation was
organized by Citizens Federal Savings Bank ("the Bank") to be a
savings and loan holding company.  The Company was formed in
January 1998 and on June 30, 1998 acquired all of the capital
stock of the Bank upon the consummation of the reorganization of
the Bank into the holding company form of ownership.  The
Company has no significant assets other than the corporate stock
of the Bank.  For that reason, substantially all of the
discussion in this Form 10-QSB relates to the operations of the
Bank and its subsidiaries.

REVIEW OF RESULTS OF OPERATIONS

OVERVIEW
--------
Net income for the three months ended March 31, 1999 was $95,094
a decrease of $4,571 or 4.59% when compared to the three months
ended March 31, 1998.  The decline in net earnings resulted from
modest declines in net interest income after provision for loan
losses and in other income and a small increase in other
expenses.  Net income for the six month period ended March 31,
1999 was $158,573 a decrease of $38,977 or 19.73% when compared
to the six month period ended March 31, 1998.  The decline in
earnings resulted from a decrease in other income and an
increase in other expense.


NET INTEREST INCOME
-------------------
Net interest income is the difference between the interest and
fees earned on loans, securities and other interest earning
assets (interest income) and the interest paid on deposits and
FHLB advances (interest expense).  The Bank's deposits and FHLB
advances are primarily short term in nature and reprice faster
than the Bank's interest earning assets, consisting mainly of
loans and mortgage backed securities, which generally have
longer maturities.  The mix of the Bank's interest earning
assets and deposits and FHLB advances along with the trend of
market interest rates have a substantial impact on the change in
net interest margin.  The cost of the Bank's interest bearing
liabilities decreased 20 basis points from 4.15% for the six
month period ended March 31, 1998 to 3.95% during the six month
period ended March 31, 1999 while the yield on interest earning
assets decreased 5 basis points from 7.66% for the six month
period ended March 31, 1998 to 7.61% for the comparable period
in the current fiscal year.  The trends for the three month
period ended March 31, 1999 when compared to the three month
period ended March 31, 1998 are similar to those for the six
month periods as discussed above.

The decrease in the average yield on interest earning assets
along with a decline in the average cost of interest bearing
liabilities led to a slight increase in net interest income
despite a decline in the average balances of interest earning
assets and interest bearing liabilities.  The Bank's net
interest income increased by $2,309 or .15% from $1,522,741 for
the six month period ended March 31, 1998 to $1,525,050 for the
six month period in the current fiscal year.   For the three
month period ended March 31, 1999 the Bank's net interest income
decreased by $3,724 or .48% when compared to the three month
period ended March 31, 1998.


OTHER INCOME
------------ 
During the three month period ended March 31, 1999 other income
decreased from $115,278 for the three month period ended March
31, 1998 to $109,110 for the comparable period in the current
fiscal year.  The decrease resulted from declines in service
charges on deposits of $19,044 which was partially offset by an
increase in gain on sale of securities of $10,654 when comparing
the three months ended March 31, 1999 to the comparable period
in the prior fiscal year.  Other income decreased $11,128 or
4.57% during the six month period ended March 31, 1999 when
compared to the same period in the prior fiscal year.  The
decline is primarily the result of a decrease in services
charges on deposit accounts of $9,018 or 4.70% when comparing
the six months ended March 31, 1999 to the six month period
ended March 31, 1998.  
                              11<PAGE>
<PAGE>
OTHER EXPENSE
-------------
During the three month period ended March 31, 1999 the Bank's
other expense increased by .78% or $5,709 from $732,721 for the
three month period ended March 31, 1998 to $738,430 for the
comparable period in the current year. Salaries and employee
benefits, depreciation expense and advertising expense increased
by $16,876, $7,373 and $6,393 respectively when comparing the
three months ended March 31, 1998 to the three month period
ended March 31, 1999.  The increase in salaries and employee
benefits resulted from a changes in recording expense associated
with the Citizens Federal Savings Bank ESOP in accordance with
the AICPA's SOP 96-3, in the way payments and accruals for the
Bank's biweekly payroll and employee benefits are recorded and
from the hiring of one additional staff person when comparing
the three months ended March 31, 1999 to the same period in the
prior fiscal year. The increases described above were partially
offset by a decline in other expense of $22,084 from $114,997
for the three months ended March 31, 1998 to $92,913 for the
three month period in the current fiscal year.  During March
1998 the Bank charged off a $25,000 investment in a small
business investment corporation.  There was no such charge
during the current fiscal period.

Total other expense increased by $46,784 or 3.21% from
$1,457,651 for the six month period ended March 31, 1998 to
$1,504,435 for the comparable period in the current fiscal year. 
Salaries and employee benefits, data processing expense and
advertising expense increased by $73,243, $23,731 and 16,822,
respectively when comparing the six month period ended March 31,
1999 to the comparable period in the prior fiscal year.  The
increase in salaries and employee benefits is described in the
prior paragraph. Effective June 16, 1998 the Bank began using
the services of a third party processor to handle the item
processing and statement rendering for all of the Bank's
checking accounts.  The expense associated with that service is
the primary reason for the increase in data processing expense
between the six month period ended March 31, 1998 when compared
to the six month period in the current fiscal year.

REVIEW OF FINANCIAL CONDITION
-----------------------------
Significant factors affecting the Bank's financial condition
from September 30, 1998 to March 31, 1999 detailed below:

ASSETS
------
Total assets decreased $1,674,166 or 1.82% from $92,166,042 at
September 30, 1998 to $90,491,876 at March 31, 1999.  The
decline is primarily attributable to a decline in the Bank's
deposits and other liabilities and was funded primarily by a
decrease in the Bank's loan portfolio of $1,936,236.  During the
six month period ended March 31, 1999 the Bank has experienced a
significant amount of prepayments in the loan portfolio,
particularly in purchased loans serviced by others, and to date
has not been successful in generating enough new loans to offset
the prepayments.

LIABILITIES
-----------
Total liabilities decreased $1,610,554 or 1.91% between
September 30, 1998 and March 31, 1999.  The decrease resulted
from a decline in the Bank's interest bearing deposits of
$1,202,074 from $73,892,189 at September 30, 1998 to $72,690,115
at March 31, 1999.  The decline in deposits is attributable to a
large withdrawal by an institutional customer of the Bank and by
seasonal withdrawals of transaction accounts.  Interest bearing
deposits increased by $198,129 between December 31, 1998 and
March 31, 1999 as transaction accounts increased modestly. 

                              12<PAGE>
<PAGE>
LOAN QUALITY
------------
A key to long term earnings growth for Citizens Federal Savings
Bank is maintenance of a high quality loan portfolio.  The
Bank's directive in this regard is carried out through its
policies and procedures for review of loans.  The goals and
results of these policies and procedures are to provide a sound
basis for new credit extensions and an early recognition of
problem assets to allow the most flexibility in their timely
disposition.

At March 31, 1999 the Bank had $1,048,200 in assets classified
as substandard including real estate acquired by foreclosure of 
$157,496, no assets classified as doubtful and $235,872 in
assets classified as loss.  A specific loan loss reserve has
been established for all loans classified as a loss.  At
September 30, 1998 the Bank had $733,881 in assets classified as
substandard including real estate acquired by foreclosure of
$59,634, no assets classified as doubtful and $225,439 in assets
classified as loss.  The increase in assets classified as
substandard include an  increase in real estate acquired by
foreclosure of $97,862 and the classification of a land
development loan in the amount of $198,511 which was more than
90 days past due at March 31, 1999.  The borrower made the past
due payments and brought the loan to a current status prior to
the filing of the March 31, 1999 10-QSB.

The allowance for loan losses was $499,119 at March 31, 1999. 
Management believes that the current allowance for loan losses
is adequate to cover any potential future loan losses which
exist in the loan portfolio, although there can be no assurance
that further increases in the loan loss allowance will not be
made as circumstances warrant.

LIQUIDITY AND INTEREST SENSITIVITY
----------------------------------
The Bank is required under applicable federal regulations to
maintain specified levels of cash and "liquid" investments in
qualifying types of United States Treasury and federal agency
securities and other investments.  Such investments serve as a
source of funds upon which the Bank may rely to meet deposit
withdrawals and other short term needs.  The Bank monitors its
cash flow position to assure adequate liquidity levels and to
take advantage of market opportunities.  The Bank maintains
liquidity levels, which significantly exceed the minimum
regulatory requirements.  Management believes that the Bank's
liquidity is adequate to fund all outstanding commitments and
other cash needs.

Changes in interest rates will necessarily lead to changes in
net interest margin.  The Bank's goal is to minimize volatility
in the net interest margin by taking an active role in managing
the level, mix and maturity of assets and liabilities.  The
Bank's primary emphasis in reducing its interest rate risk is 
to focus on reducing the weighted average maturity of the loan
portfolio and by purchasing adjustable rate securities.

YEAR 2000 (Y2K) READINESS DISCLOSURE
------------------------------------
The Bank is a user of computers, computer software and equipment
utilizing embedded microprocessors that are affected by the year
2000 issue.  The year 2000 issue exists because many computer
systems and applications use two digit date fields to designate
a year.  As the century date change occurs, date sensitive
systems may recognize the year 2000 as 1900, or not at all.  The
inability to recognize or properly treat the year 2000 may cause
erroneous results, ranging from system malfunctions to incorrect
or incomplete processing.

                              13<PAGE>
<PAGE>

Citizens Federal Savings Bank has prepared an action plan to
evaluate our computer systems, software products and vendor
services for year 2000 compliance.  The Bank's plan consists of
the following:

      PROBLEM AWARENESS - The Bank is aware of the problems that 
      could potentially arise from year 2000 problems and has
      analyzed internal systems as well as services provided by
      third parties.  Educational initiatives with regard to
      customer awareness will continue into 1999.
      ASSESSMENT PHASE - The Bank has inventoried technology
      assets and contacted third party vendors and service
      providers to assess exposure to year 2000 problems.  The
      Bank's third party data processing arrangement has been 
      identified as the primary mission critical system for
      Citizens Federal.
      RENOVATION PHASE - Hardware and software which was
      identified during the assessment phase as not being year
      2000 compliant has been upgraded, replaced or scheduled
      for replacement during the early part of 1999.  A third
      party processor provides the Bank's data processing and
      one set of testing was done between the Bank and the
      processor during September 1998.  Based on the results
      from testing which has already been conducted the mission
      critical third party data processing system will be ready
      for year 2000 processing.
      VALIDATION - The Bank's internal systems as well as the
      third party processor which provides the Bank's primary
      data processing requirements have been tested for year
      2000 compliance.  Additional testing of those critical
      applications is scheduled for the early part of 1999.  In
      addition to the testing conducted by Citizens Federal with
      the third party processor, over 100 other users of the
      system have also conducted tests and will be doing
      additional testing for year 2000 readiness.  The Bank has
      received certifications from non-critical vendors and
      service providers and will rely on those where complete
      testing is not possible.
      IMPLEMENTATION - Replacement of non-compliant technology
      at the institution is essentially complete.  Results from
      additional tests, which are scheduled for early 1999, will
      be thoroughly reviewed and remedial actions, which are
      determined to be necessary for year 2000 compliance, will
      be taken.  

Based on the results of tests, reviews and analysis done to date
the Bank expects to be able to operate in a normal fashion
before, during and through the year 2000 period.  While working
to ensure that the Bank's primary objective of conducting
business as usual there can be no guarantee that there will not
be disruptions related to the year 2000.  

A failure of the Bank's data processing system would be a likely
worst case year 2000 scenario.  Under such conditions the Bank
would operate in a manual mode relying on printed trial balance
reports from December 30, 1999 and/or December 31, 1999 as a
base record during the time the problems with the system were
being corrected.  The Bank's management is in the process of
reviewing appropriate cash and liquidity levels as the year 2000
approaches. 
 
The Bank has incurred approximately $48,000 in capital
expenditures to upgrade and/or replace computer equipment and
approximately $5,000 in operating expenses associated with year
2000 compliance since the beginning of 1998.  Additional
expenditures to attain year 2000 readiness are not expected to
exceed $25,000 and will not have a material financial impact on
the Bank.

                              14<PAGE>
<PAGE>
INFORMATION ABOUT FORWARD-LOOKING STATEMENTS
--------------------------------------------
Any statement contained in this report which is not a historical
fact, or which might otherwise be considered an opinion or
projection concerning the Bank or its business, whether
expressed or implied, is meant as and should be considered a
forward-looking statement as that term is defined in the Private
Securities Litigation Reform Act of 1996.  Forward-looking
statements are based on assumptions and opinions concerning a
variety of known and unknown risks, including but not
necessarily limited to changes in market conditions, natural
disasters and other catastrophic events, increased competition,
changes in availability and cost of reinsurance, changes in
governmental regulations, and general economic conditions, as
well as other risks more completely described in the Bank's
filings with the Securities and Exchange Commission, including
this Annual Report on Form 10-KSB.  If any of these assumptions
or opinions prove incorrect, any forward-looking statement made
on the basis of such assumptions or opinions may also prove
materially incorrect in one or more respects.

CAPITAL ADEQUACY AND RESOURCES
------------------------------
Management is committed to maintaining capital at a level
sufficient to protect stockholders and depositors, provide for
reasonable growth, and fully comply with all regulatory
requirements.  Management's strategy to maintain this goal is to
retain sufficient earnings while providing a reasonable return
to stockholders in the form of dividends and return on equity.

The Office of Thrift Supervision has issued guidelines
identifying minimum regulatory "tangible" capital equal to 1.50%
of adjusted total assets, a minimum 3.00% core capital ratio and
a minimum risk based capital of 8.00% of risk weighted assets. 
The Bank has provided the majority of its capital requirements
through the retention of earnings.

At March 31, 1999 the Bank satisfied all regulatory
requirements.  The Bank's compliance with the current standards
is as follows:

<TABLE>
<CAPTION>
                                                                    
                                                          For  capital              Well
                                       Actual           adequacy purposes        capitalized
                                  ----------------      ------------------    ---------------
                                  Amount     Ratio      Amount       Ratio    Amount    Ratio 
                                  ------     -----      ------       -----    ------    -----
<S>                               <C>         <C>        <C>          <C>      <C>       <C>
Total capital
(to risk weighted assets)        $8,026,313   17.98%    3,572,160     8.00%   4,465,200  10.00%
Tier I capital                  
(to risk weighted assets)        $7,888,103   17.67%    1,786,080     4.00%   2,679,120   6.00%
Tier I capital
(to average assets)              $7,888,103    8.64%    3,651,158     4.00%   4,563,948   5.00%


Reconciliation of capital:              Risk Weighted        Tier I Capital
                                           Capital

Total stockholders' equity (GAAP)       $7,744,440             $7,744,440
Unrealized gain on securities - AFS        143,663                143,663 
Allowance for loan losses                  263,246                     --
Equity investments                        (125,036)            
 Total                                  $8,026,313             $7,888,103

</TABLE>

                               15<PAGE>
<PAGE>
            CFS BANCSHARES, INC. AND SUBSIDIARY

                 PART II OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

The Bank is defending  various lawsuits and claims.  In the
opinion of management the ultimate disposition of these matters
will not have a significant effect on the financial position of
the Bank.

ITEM 2: CHANGE IN SECURITIES

ITEM 3: DEFAULT UPON SENIOR SECURITIES

Not Applicable

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None


ITEM 5: OTHER INFORMATION:

As of October 18, 1996 and July 23, 1998, the Bank entered into
Agreements with the Office of Thrift Supervision (OTS) intended
to correct certain deficiencies, about which the OTS expressed
supervisory concern.  Pursuant to the Agreement, the Bank agreed
to adopt certain guidelines, procedures and policies.  The Bank
also agreed to adopt a business plan covering such matters as
lending activities, operating expenses, operating results and
other matters.

The Bank believes it is in substantial compliance with or will
be in compliance with the terms of the Agreement within the time
periods stated within the agreement.  If the Bank were not to
comply with the Agreement, the OTS would have certain
enforcement rights, possibly including the right to commence an
action to remove directors and/or officers or to appoint a
conservator or a receiver for the Bank.  Although compliance
with the Agreement has not had and is not expected to have a
material impact on the operations of the Bank, there can be no
assurance that the Agreement will not have an adverse impact on
the Bank's future operations.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     Exhibit 27 - Financial Data Schedule for the quarter ended 
                  March 31, 1999


                             16<PAGE>
<PAGE>
            CFS BANCSHARES, INC. AND SUBSIDIARY

                      SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.



                         CFS BANCSHARES, INC.
                            (Registrant)

Date: May 12, 1999       /s/ Bunny Stokes, Jr.
                         -------------------------------------
                         Bunny Stokes, Jr.
                         Chairman/CEO
                         (principal executive officer)


Date: May 12, 1999       /s/ W. Kent McGriff
                         ------------------------------------
                         W. Kent McGriff
                         Executive Vice President
                         (principal financial and accounting
                         officer)
                                   

                           17